U.S. Energy Boom Won’t Hurt Canadian Oil Producers — HSBC

The U.S. energy boom doesn’t necessarily spell bad news for Canadian oil producers, who happen to sell the bulk of their production southward, according to HSBC 's chief Canadian economist.

In a report released Wednesday, HSBC’s David Watt lays out some key implications that the rise of the U.S. as an energy superpower will have for Canada’s energy patch. He said the Canadian gas sector is “relatively more vulnerable,” as rising U.S. shale gas production will continue to weigh on volumes of U.S.-bound shipments and as Canada imports more U.S.-produced gas.

For oil producers, it’s a different story. The U.S. energy boom “might present more of an opportunity than a challenge to Canada’s oil sector,” Mr. Watt said. He said Canadian oil exports to the U.S. are expected to continue to rise in coming years, citing forecasts from the U.S. Energy Information Administration which suggest Canada’s share of U.S. crude oil imports will increase to 40% in 2035 from 25% last year. The EIA projects U.S. imports of crude oil from Canada climbing at an annual average rate of 1.8% to 3 million barrels a day, while imports from Mexico and OPEC are expected to decline.

But, as Canada Real Time noted recently, there is one significant obstacle standing in the Canadian oil sector’s way: a lack of pipeline capacity. Mr. Watt warns that oil producers could begin to feel the pinch in 2015 TransCanada Corp.’s Keystone XL project–which would ship Alberta crude to the U.S. Gulf Coast–still needs approval from the White House, while another key contentious project Enbridge Inc.'s Northern Gateway, is in the midst of an environmental review.

“Even if all of these controversial projects are approved, and completed on the proposed timelines, pipeline capacity will again be an issue a decade from now,” Mr. Watt predicted.

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Canada Real Time provides insight and analysis into what’s making news in Canada, a country punching above its weight on the world stage thanks to its vast resources and strong banking sector. Drawing on the expertise of The Wall Street Journal and Dow Jones Newswires, we take a look at developments in fields ranging from business to politics to culture. You can contact the editors at canadaeditors@dowjones.com